Hurricane Ida is sure to take a toll on the energy, chemical and shipping industries that have major hubs along the Gulf Coast, but the impact on the overall U.S. economy should be modest so long as damage estimates don’t rise sharply and refinery shutdowns are not prolonged, economists suggested Sunday.
Mark Zandi, chief economist at Moody’s Analytics, said the disruptions caused by Ida will likely lead him to downgrade his forecast for annual U.S. economic growth in the current July-September quarter by a few tenths of a percentage point. But that economic loss, he said, could be reversed in the final quarter of the year as a result of the rebuilding from the hurricane’s damage that will likely follow.
GDP to grow
Zandi said he expects the nation’s gross domestic product – its total output of goods and services – to grow at a 6.5 percent annual rate in the second half of this year, matching the average growth of the first six months. Still, besides the impact of Ida, Zandi noted that the highly contagious delta variant of the coronavirus poses risks to the economic outlook, depending on how much it leads Americans to slow their spending on travel, restaurant meals or other forms of spending.
“The key channel for Ida to impact the broader economy is through energy prices,” Zandi said. “We will have to see how much damage occurred to production in the Gulf and how long that production will stay offline.”
A brief spike in gasoline prices could result, Zandi said, because of the production shutdowns. But he suggested that the increase in pump prices might last for only a few weeks.
“The worst-case scenario is Ida might add 10 cents to 20 cents (US) to the price of a gallon of gas through September,” he said. “That would be consistent with what has happened in the past when we have had bad storms blow through Louisiana.”
Oil prices weren’t showing a spike in reaction to Ida on Monday even as the storm raged. The price on the New York Mercantile Exchange fell 1.2 percent to US$67.91 per barrel.
Brief jump in gas prices
Brian Bethune, an economist at Boston College, said he agreed that a brief jump of up to 20 cents a gallon for gasoline was likely. Still, Bethune cautioned that the price increase could be more severe depending on how long the production shutdowns last and whether other regions have alternative supplies. He noted that after the hack of the Colonial Pipeline earlier this year, some states saw prices rise sharply as service stations ran out of gas.
S&P Global Platts said Sunday that government statistics show that 95 percent of oil and gas production in the Gulf Coast region was shut down as Ida made landfall. In addition, Platts said that nearly 4.4 million barrels per day of operating refinery capacity in the path of Ida, primarily in Louisiana, had been taken offline before the hurricane blew ashore Sunday afternoon.
“Many plants have been hardened against hurricanes, but disruptions in operations are still very likely due to flooding, power outages and personnel dislocations,” Platts analysts said.